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SWEDEN
Economic Freedom Score
25
Least
free
World Rank: 21
weden’s economic freedom score is 72.4, making its
economy the 21st freest in the 2010 Index. Its score has
increased by 1.9 points since last year, reflecting improved
scores in five of the 10 economic freedoms. Sweden is ranked
10th out of 43 countries in the Europe region, and its overall
score is above the world and regional averages.
With its economy open to global trade and investment, Sweden scores well in trade freedom, investment freedom, monetary freedom, and financial freedom. The overall regulatory
and legal environment, transparent and efficient, encourages robust entrepreneurial activity. Banking is guided by
sensible regulations and prudent lending practices. Monetary stability is well maintained, with inflationary pressures
under control. The judicial system, independent and free of
corruption, provides strong protection of property rights.
However, Sweden’s scores in fiscal freedom and government spending are among the lowest in the world. Although
the corporate tax rate has been reduced and the wealth tax
has been abolished, the overall tax burden remains large.
The top income tax rate of 57 percent is one of the world’s
highest. Total government spending is more than half of
GDP.
Background: Sweden has enjoyed a buoyant economy
since becoming a member of the European Union in 1995,
although growth came to a halt in 2009 as a result of the
international financial crisis. The economy relies heavily on
international trade, mostly within Europe, and total trade
accounts for more that 50 percent of GDP. Sweden rejected
adoption of the euro by popular referendum in 2003. The
Alliance for Sweden, a center-right coalition headed by
Moderate Party leader Fredrik Reinfeldt, unseated the Social
Democrat Party of Göran Persson in September 2006 with
a pledge to sell state assets, increase growth, and reduce
government debt. Sweden’s principal exports include
paper products, machinery and transport equipment, and
chemicals.
75
Most
100 free
0
72.4
Regional Rank: 10
S
50
100
100
Country’s Score Over Time
Most free
8080
6060
World average
4040
Sweden
2020
00
Least free
1995
1998
2001
2004
2007
2010
Quick Facts
Population: 9.2 million
GDP (PPP): $344.7 billion
–0.2% growth in 2008
2.5% 5-year compound annual growth
$37,383 per capita
Unemployment: 6.2%
Inflation (CPI): 3.3%
FDI Inflow: $43.7 billion
2008 data unless otherwise noted
Data compiled as of September 2009
How Do We Measure Economic Freedom?
See page 457 for an explanation of the methodology or visit the Index Web site at heritage.org/index.
395
sweden’s Ten Economic Freedoms
MONETARY FREEDOM — 79.5
Business Freedom
Trade Freedom
Fiscal Freedom
Government Spending
Monetary Freedom
Investment Freedom
Financial Freedom
Property Rights
Fdm. from Corruption
Labor Freedom
Inflation has been low, averaging 2.7 percent between 2006
and 2008. As a participant in the EU’s Common Agricultural Policy, the government subsidizes agricultural production, distorting the prices of agricultural products. Prices
are generally set by the market, but oligopolies may hinder
competition, and the government influences prices through
regulations and state-owned enterprises and utilities. Ten
points were deducted from Sweden’s monetary freedom
score to account for policies that distort domestic prices.
95.5
87.5
36.7
17.3
79.5
85.0
80.0
95.0
93.0
54.9
0
0
least
free20
40
50
60
= world average
100
100
most free
80
BUSINESS FREEDOM — 95.5
The overall freedom to start, operate, and close a business
is strongly protected under Sweden’s regulatory environment. Starting a business takes 15 days, compared to the
world average of 35 days. Obtaining a business license
takes less than the world average of 18 procedures and
218 days. Bankruptcy proceedings are fairly easy and
straightforward.
TRADE FREEDOM — 87.5
Sweden’s trade policy is the same as that of other members
of the European Union. The common EU weighted average
tariff rate was 1.3 percent in 2008. However, the EU has
high or escalating tariffs for agricultural and manufacturing products, and its MFN tariff code is complex. Nontariff barriers reflected in EU and Swedish policy include
agricultural and manufacturing subsidies, quotas, import
restrictions and bans for some goods and services, market
access restrictions in some services sectors, non-transparent and restrictive regulations and standards, and inconsistent regulatory and customs administration among EU
members. Sanitary and phytosanitary regulations are burdensome, and enforcement of intellectual property rights
is problematic. Ten points were deducted from Sweden’s
trade freedom score to account for non-tariff barriers.
FISCAL FREEDOM — 36.7
Sweden has a very burdensome income tax rate and a
moderate corporate tax rate. The top income tax rate is
effectively 57 percent, and the corporate tax rate is 26.3
percent, reduced from 28 percent as of January 1, 2009.
Other taxes include a value-added tax (VAT), a property
tax, and a capital gains tax. In the most recent year, overall
tax revenue as a percentage of GDP was 48.9 percent.
GOVERNMENT SPENDING — 17.3
Total government expenditures, including consumption
and transfer payments, are very high. In the most recent
year, government spending equaled 52.5 percent of GDP.
In response to the global crisis, Sweden undertook one of
the largest fiscal stimulus programs in all of the European
Union, estimated at 6.6 percent of GDP.
396
INVESTMENT FREEDOM — 85
Foreign companies may invest in most sectors in Sweden.
Government monopolies are maintained in the retail sales
of pharmaceuticals and alcoholic beverages. In general,
investment laws and the bureaucracy are efficient. A complex network of permits and licenses applies to domestic
and foreign firms, and labor and environmental regulations add to the cost of investment. Residents and nonresidents may hold foreign exchange accounts. There are
no controls on payments and transfers or repatriation of
profits. The purchase of real estate by non-residents may
require a permit.
FINANCIAL FREEDOM — 80
Regulation of the financial system is transparent and largely consistent with international norms. Banks offer a full
range of financial services. Nearly all commercial banks
are privately owned and operated, and credit is allocated
on market terms. Foreign insurers are well represented
in the insurance sector. The Stockholm Stock Exchange is
modern, active, and open to domestic and foreign investors. Sweden’s banking system has weathered the global
financial crisis relatively well. No government takeovers
of banks have occurred.
PROPERTY RIGHTS — 95
The judiciary is independent and fair. Contracts are
respected, and Swedish law generally provides adequate
protection for all property rights, including the right to
intellectual property.
FREEDOM FROM CORRUPTION — 93
Corruption is perceived as almost nonexistent. Sweden
tied with Denmark and New Zealand for 1st place out of
179 countries in Transparency International’s Corruption
Perceptions Index for 2008. Comprehensive laws on corruption are fully implemented, and Sweden has ratified the
1997 OECD Anti-bribery Convention. The constitution and
law provide for public access to government information.
LABOR FREEDOM — 54.9
Sweden’s labor regulations are rigid. The non-salary cost of
employing a worker is high, and dismissing an employee
is costly and burdensome.
2010 Index of Economic Freedom